Interim Results Presentation July 2018 Martyn Ratcliffe Chairman - - PowerPoint PPT Presentation

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Interim Results Presentation July 2018

Martyn Ratcliffe Chairman Rebecca Archer Finance Director

To be read in conjunction with the Interim Results announcement released on 24 July 2018 In addition to IFRS measures, alternative performance measures are used in this presentation. Refer to the Notes to the Interim Results announcement for detail and explanation.

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• Group revenue of £25.1m (H1-17: £18.0m)
• Record revenue for the Group, benefitting from TSG acquisition
• 85% of Core Business revenue from international markets
• 32% of Core Business revenue invoiced in US Dollars and 14% in Euros
• Adjusted operating profit of £3.7m (H1-17: £3.2m)
• Negative foreign exchange effect of £0.3m compared to H1-17
• Statutory PBT of £2.5m (H1-17: £2.3m)
• Release of TSG deferred consideration of £0.5m
• Offset by increase in amortisation on acquisition intangible assets of £0.4m
• Acquisition integration costs of £0.3m (H1-17: £nil)
• (None of these adjustments affect adjusted operating profit)
• Adjusted basic EPS increased by 15% to 7.0 pence (H1-17: 6.1 pence)
• Basic EPS of 6.0 pence (H1-17: 5.1 pence) and diluted EPS of 5.8 pence (H1-17: 5.0 pence)
• Cash balance of £18.5m (H1-17: £26.3m) and Net Funds of £5.1m (H1-17: £12.1m)
• Net funds + freehold property per share of 66.8 pence (H1-17: 86.2 pence) following investment in TSG

Financial Summary

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• Record revenue, benefitting from TSG acquisition
• Organic growth strongest in Medical sector
• Negative FX impact of £0.3m in period

Group Revenue

5 10 15 20 25 30 H1-12 H2-12 H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18

Revenue (£m)

Non Core: Property income Other core business revenue Core business: Services revenue

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• 85% (H1-17: 80%) of Core Business revenue derived from international markets
• 32% of Core Business revenue invoiced in US$ (H1-17: 32%) and 14% in Euro (H1-17: 9%)
• Employee Distribution - UK: 84%; America: 11% and Continental Europe: 5%

Revenue by Currency/Geography

Core Business Revenue by Currency Core Business Revenue by Geography

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 Other GBP EUR USD 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18 Other UK Europe North America

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Service Offerings Revenue Profile

Applied Science & Product Development 48% Technology Advisory 14% Regulatory 37%

Service Offerings Overview

• Applied Science & Product Development
• Organic growth on both year-on-year and

sequential period basis

• Medical sector strong organic growth
• Commercial sector decline year-on-year but

maintained H2-2017 levels, as anticipated

• Technology Advisory
• Flat performance led by Food & Beverage

and Consumer with Energy still slow

• Regulatory
• Performance from TSG operations in USA

and Europe meeting expectations

• Food & Beverage continuing to perform well

H1-18 Core Business Revenue

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Market Sector Revenue Profile

Medical 34% Commercial 49% Food & Beverage 18%

Market Sector Overview

• Medical: Continued strong performance in

Applied Science/Product Development.

• Commercial: Benefitted from TSG
• acquisition. Market still slow in some

sectors.

• Food & Beverage: Steady performance

with greater integration of service

• fferings

H1-18 Core Business Revenue

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0% 6% 12% 18% 24% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 H1-12 H2-12 H1-13 H2-13 H1-14 H2-14 H1-15 H2-15 H1-16 H2-16 H1-17 H2-17 H1-18

• Record H1 adjusted operating profit
• Foreign exchange negative by £0.3m in H1-18 compared to H1-17
• Margin decline related to TSG acquisition integration

Adjusted Operating Profit

Adjusted operating profit (£m) Adjusted operating profit margin (%)

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TSG Integration

• TSG acquired in September 2017
• Gross consideration of $17.0m (£13.2m) funded from existing cash resources
• Net consideration was £10.4m, including £2.8m cash acquired with the business
• Net acquisition integration costs of £1.1m incurred since acquisition
• USA Integration Programme
• Separation of systems (incl payroll, benefits, IT) from vendor completed
• Made good progress on improvement of financial/operational controls and processes
• Segmentation of client base to focus on profitable sectors
• Europe Integration Programme
• New Head of TSG Europe appointed, supported by Ops Director and Business Development Director
• Creating integrated European strategy rather than historic autonomous units
• Launched French subsidiary and recruited new team
• Closed sub-scale subsidiary/branch office operations in Central/Eastern Europe. Appointed agents to

cover these territories, consistent with other geographies

• One-off cost included in acquisition integration costs above

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Freehold Property

• Science Group owns two freehold properties
• Harston Mill is owned by Sagentia Limited, the largest operating business
• Great Burgh is held in a dedicated subsidiary with leases to 2 of the operating businesses
• Considering moving ownership of Harston Mill from the trading company to a separate company
• Benefits from changing ownership of Harston Mill
• Separate property management from trading activities – financial performance and risk
• More flexible funding structure related to property
• Tax Implication
• Historic structure enabled property development costs to be taken as tax deductible expenditure
• Transfer of property will create tax cash outflow estimated between £1.8m and £2.1m
• Liability of £1.7m already included on Balance Sheet
• Possibility that tax losses in “Investment Subsidiary” can be utilised to partially offset (approx 50%)
• ver a 4-5 year period
• Board are exploring the options

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Head office Harston Mill Harston, Cambridge CB22 7GG UK Phone: +44 1223 875200 info@sciencegroup.com

www.sciencegroup.com

Head office Harston Mill Harston, Cambridge CB22 7GG UK Phone: +44 1223 875200 info@sciencegroup.com

www.sciencegroup.com